6 min read EUR/USD has broken down to its weakest level in around a year, and the move is being driven more by the dollar than by the euro. The Federal Reserve turned hawkish at its June meeting under new chair Kevin Warsh, holding rates at 3.50% to 3.75% but shifting its projections to signal a possible 2026 rate hike and dropping its previous easing bias. A firmer dollar and higher US yields have followed, and that has done most of the work in pushing the pair lower.
The euro side is not soft, which is what makes this setup interesting. The ECB raised rates in June for the first time since 2023, lifting its deposit rate to 2.25%, and eurozone inflation is still running well above target at 3.2% in May, the highest since September 2023, with core pressures broadening. ECB President Christine Lagarde opened the Sintra forum on Monday with a notably hawkish tone, signalling the bank is ready to tighten further if inflation risks build.
That leaves EUR/USD caught between two hawkish central banks with no clear rate-divergence story to pull it in either direction. For now the dollar leg has won, and that is what has dragged the pair below its range floor.
The timing matters, because the week ahead is packed with catalysts. On Wednesday, Warsh, Lagarde, Bailey and Macklem share a panel at Sintra at 13:00 GMT, Warsh’s first appearance outside the US since taking office. With the new Fed chair no longer offering forward guidance, markets could trade his tone closely. Eurozone flash inflation also lands on Wednesday and is forecast to ease slightly. The bigger one is the US jobs report, brought forward to Thursday because US markets are closed on Friday for the July 4 holiday. A hot print could revive rate-hike bets and support the dollar, while a softer one could give the euro some room to recover.
The daily chart
On the daily timeframe, EUR/USD broke below the higher-timeframe support area at 1.14 on 24 June. That is significant, as it is the first time the pair has traded below this level since June 2025, almost exactly a year.
The current daily candle is showing a potential bearish rejection of that range low. The area that acted as support for so long could now be flipping into resistance, and that would be confirmed if EUR/USD fails to reclaim the 1.14 zone from below.
If the rejection holds, there are two levels of interest below:
- The next immediate support sits around 1.128.
- If that level fails to hold, the move could potentially extend all the way down to 1.11.
The 4H chart
The 4H chart adds detail to the rejection. A double top pattern has formed, with both tops created inside the local short reload zone of the breakdown move, the area sellers would look to re-enter from.
There is also a lack of confirmation on the accumulation/distribution indicator. As price tried to reclaim the level and printed two equal highs, the indicator made a lower high instead, pointing to weak participation behind the bounce.
Applying a measured move to the double top, the potential target aligns with the local low at around 1.133. If that level is reached and breaks, a much larger move to the downside could open up.
The bullish alternative is clear. If the local short reload zone fails to hold as resistance and EUR/USD reclaims the 1.145 area, the pair could potentially push back up towards the range equilibrium around 1.16.
With so many central bank catalysts landing this week, this is an important inflection point for EUR/USD to decide its direction for the weeks ahead.
Key levels to watch
- Range low and pivot: 1.14, broken on 24 June, the level the pair needs to reclaim to ease the bearish pressure.
- Reclaim level: 1.145, a recovery above the reload zone could open a move back towards the range EQ.
- Range equilibrium: 1.16, the upside target if the euro reclaims the broken zone.
- Double-top measured-move target: 1.133, a break here could open a larger decline.
- Daily support: 1.128, the next downside level if the rejection holds.
- Deeper support: 1.11, in play if 1.128 gives way.
Trading involves risk.
Author
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